We remain positive on markets and any correction near to 9,400 levels would be a good entry point as the resistances will act as support from the current levels, Vikas Jain, Senior Research Analyst at Reliance Securities, said in an interview with Moneycontrol’s Kshitij Anand.
Here are the edited excerpts of the interview:
Q. A strong day to end the week! While the Sensex is back above 33,000, the Nifty50 reclaimed 9,800. What is fuelling the market rally on D-Street?
A. The Nifty50 closed 7.7 percent higher for the week post the breakout above 9,500 levels and positive momentum from the global markets led to a sharp up move.
Among stocks, there was positive news flow from the quarterly results like IndusInd Bank, Ambuja Cement and Hexaware Technologies and expectations of strong results from Reliance Industries helped the overall market momentum.
The monthly expiry and crossover of key resistance levels resulted in short covering in the index options due to which the markets ended at the highest point in the expiry month.
Q. As we close the month of April on a positive note after a massacre in March, how is May likely to pan out for investors. There is a very popular Wall Street adage ‘Sell in May and Go Away’? Do you think we could hold onto gains if not why?
A. The Nifty50 closed 14.1 percent higher for the April expiry to post one of the best months of gains in the last decade with strong positive momentum across sectors and stocks.
The Nifty50 has rallied by about 31 percent from its swing low of 7,511 recorded in March. The pullback started since the countrywide lockdown came into effect and got stronger with global markets pullback.
The adage ‘Sell in May and Go Away’ did not hold true in recent years as we have ended positively in May month for the last five years.
We believe there could be some more positive momentum till 10,400 levels and then correction could set in as the 200-week average and 38.2 percent pullback from its 52-week lows are placed in the range of 10,350-10,400 levels.
The later part of the results season is always very weak which could also pull the markets lower in the second half of May.
Q. What is your call on banking and auto stocks which have run up quite sharply in the week gone by?
A. The Nifty Bank was being a laggard in the current up move but private banks gained traction post the results of HDFC Bank and gained further traction as other private banks announced their full-year results.
PSU banking has remained flat trading near to its all-time lows and we could expect a strong up move in May as the monthly candle ends in a Doji pattern and the set up on daily and weekly charts looks positive.
Auto sector has moved up 33 percent from its 52-week low. We expect some weakness as individual stocks are being in the overbought zone on the daily charts and on the higher side the 200-Day average is placed at 7,200 levels which will act as a strong resistance. The risk-reward is not favourable from current levels.
Q. What are the important factors which investors could track in the coming week and in the month of May which could dictate the trend for markets?
A. In the coming week, D-Street's reaction from Nifty50 companies like HUL, Reliance Industries and Tech Mahindra would be the key to watch and how the global markets pan out.
We remain positive on markets and any correction near to 9,400 levels would be a good entry point as the resistances will act as support from current levels.
The Q4FY20 results season would move into the third week and selectively, the lockdown will also open in non-containment zones of various states which will be important to watch for the manufacturing and industrial activities to resume.
Q. What is your view on Tech Mahindra and HUL which came out with results on April 30? What should investors do — buy, sell or hold?
A. HUL has already witnessed a sharp correction in the past two weeks and the results were largely in-line with expectations as it has gained market share in the overall business and low volume growth is mainly due to low stocking.
Tech Mahindra posted a weak set of numbers. We expect a weak opening for the stock but one should buy on dips near its support at lower levels in the range of 490-500 levels. It could be a good entry point for the stock to accumulate on declines.
Q. What are your view on RIL results and the rights issue, and what should investors do? Do you see a positive/negative reaction on May 4 (Monday)?
A. The results are in-line except for the exceptional loss which dragged the overall profits. But consumer business and Jio subsidiary reported stronger growth for the quarter.
Reliance Industries’ rights issue of Rs 53,125 crore is priced at Rs 1,257, the ratio of 1:15 held by shareholders, which will enable shareholders to increase the holdings at a lower price compared to the closing of Rs 1,467 per share.
We expect a positive opening on May 4 (Monday), but the upside could be capped as multiple resistances are placed in the range of 1,550-1,600 levels near to its previous tops.
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Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust, which controls Network18 Media & Investments Ltd.
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